gooddecisions
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Post by gooddecisions on Jan 30, 2014 9:58:55 GMT -5
I think we're finally ready to pull the trigger on a term life insurance policy. We both work and will soon have 2 small children. I was thinking a million dollar policy, he was thinking 500,000. Now, I'm thinking- split the difference and each get a $500,000 policy. This would mean if we were both killed in an accident our children would have the 1MM policies and all our assets. Getting 2 one million dollar policies would start to add up at about $132/month. Two $500K policies would be about $88/month.
What's everyone do for term life insurance and do you have separate policies for each of you? Do you own the policy on your spouse or does your spouse own his/her own policy and have you as the beneficiary?
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Deleted
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Post by Deleted on Jan 30, 2014 10:06:46 GMT -5
Life insurance is basically income insurance, so the traditional guideline is normally 8-10X income. If there is a stay at home spouse, then you have to figure what would it cost to hire someone to do what they do (daycare, housecleaning etc). In my case I figured what I would need to pay off the house, and put the kids through college. At the time I had a spouse who was working and making about the same as me, so he could have been fine handling the household expenses if there was no house payment. I have a 400K term policy and an 80K one free through work. This works out to be about 12X income.
We are the owners of our policies and have the other as beneficiary. Now that we're divorced, I kind of wish we would have done it the other way, but whatever.
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yogiii
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Post by yogiii on Jan 30, 2014 10:07:46 GMT -5
We each bought a 500k policy for either 20 or 25 years, I think 25. Our kids are 3.5 and 9 months and we bought the policies when the oldest was 1. We also each have a 100k policy free through work.
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gooddecisions
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Post by gooddecisions on Jan 30, 2014 10:10:57 GMT -5
Life insurance is basically income insurance, so the traditional guideline is normally 8-10X income. That's my argument at well, but his argument is that it's to cover debt so the living one is not on the hook.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 30, 2014 10:18:30 GMT -5
We went on the low end. DH and I each have $250K life insurance policies on each of us. And they're for 25 years. We got them a couple of years ago.
I wanted enough coverage that if one of us dies, the house and bills would be paid and there's be a bit leftover. We both make similar amounts and live in a MCOL. We also each have free policies though work for another $30K or so.
If we die together, all assets (including retirement funds) and the policies are about $1M + whatever the kids would get monthly from SS (is that SSI?)
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Deleted
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Post by Deleted on Jan 30, 2014 10:28:03 GMT -5
Do they still sell the "couple's" insurance? I know that wasn't the name, but you could get a single $1,000,000 policy on both of you. If either of you died, the insurance paid off. The other person, though, was no longer insured. It was much cheaper than two separate policies and might meet your needs . . . if it is still around.
I'm old with only a retired husband and a cocker spaniel as dependents. But I do think of DH as sort of a dependent in the sense that I bought the house before we were married, and I'm not entirely certain that he could pay for it and its expenses on his own. Sure, he could sell, but he would need time to do that and help packing stuff up/disposing of it, etc.
So I have $150,000 worth of personal term life insurance until I am 70. (I just turned 60). It's really cheap for my age . . . $28 a month. I also have "free" life insurance through work, but I'm not convinced that it is free. Anything over $50,000 is actually taxable. There is a line on my pay stub that is called "fringe benefits" that amounts to $986 a year. I hope that covers other "free" benefits that they provide because $82.13 a month is rather expensive for their employer-provided $150,000 worth of term.
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Deleted
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Post by Deleted on Jan 30, 2014 10:29:25 GMT -5
I do think your rates seem a little high. We went through intelliquote and ended up getting the best rate with ING.
I pay $30/month for 400K (but I was 41 at the time I started it) and DH paid $24/month.
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gooddecisions
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Post by gooddecisions on Jan 30, 2014 10:32:54 GMT -5
I do think your rates seem a little high. We went through intelliquote and ended up getting the best rate with ING. I pay $30/month for 400K (but I was 41 at the time I started it) and DH paid $24/month. It's $33/month for a $500K policy, but since both of us need policies I doubled it.
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gooddecisions
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Post by gooddecisions on Jan 30, 2014 10:33:49 GMT -5
Do they still sell the "couple's" insurance? I know that wasn't the name, but you could get a single $1,000,000 policy on both of you. If either of you died, the insurance paid off. The other person, though, was no longer insured. It was much cheaper than two separate policies and might meet your needs . . . if it is still around. That's a good question and does sound easier.
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Deleted
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Post by Deleted on Jan 30, 2014 10:36:59 GMT -5
I do think your rates seem a little high. We went through intelliquote and ended up getting the best rate with ING. I pay $30/month for 400K (but I was 41 at the time I started it) and DH paid $24/month. It's $33/month for a $500K policy, but since both of us need policies I doubled it. Ok. You put $88 in the OP.
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whoisjohngalt
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Post by whoisjohngalt on Jan 30, 2014 10:38:09 GMT -5
We went on the low end. DH and I each have $250K life insurance policies on each of us. And they're for 25 years. We got them a couple of years ago. I wanted enough coverage that if one of us dies, the house and bills would be paid and there's be a bit leftover. We both make similar amounts and live in a MCOL. We also each have free policies though work for another $30K or so. If we die together, all assets (including retirement funds) and the policies are about $1M + whatever the kids would get monthly from SS (is that SSI?) I don't know if you are comfortable sharing this, but how much do you guys pay in premiums? We are about the same age and I know your DH has some health issues, so was wondering.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 30, 2014 10:41:13 GMT -5
I'm ashamed to say I don't even know Lena. DH did them though the branch of the his company that sells life insurance. So he went with auto-deductions from his paycheck and I never see a bill. I'll find out and get back to you.
I do know that when they did the evals, I got the "good" rating and DH got the "excellent" rating for our health.
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raeoflyte
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Post by raeoflyte on Jan 30, 2014 11:11:57 GMT -5
Somehow I feel overinsured now...
I have a policy of just over 1 mil for me, plus one through work that is about $480k. Dh has a policy of $680k and another $125k through my job. I figure the ones through my job are a bonus because my luck I'd get laid off and killed on the drive home.
I figured we needed enough money to pay off the house, provide for the kids (and I calculated out at daycare rates since ds was an infant, dd wasn't around yet but we knew we wanted more kids), a monthly stipend for the kids caregivers until the youngest turned 18, and still have money for their college. (If I'm alive they'll just have to accept my emotional support). I didn't take SS into consideration since if it were my dh who died, SS might fight me on paying that for the kids because of current legislation.
We pay $125 a month.
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Wisconsin Beth
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Post by Wisconsin Beth on Jan 30, 2014 11:18:27 GMT -5
LOL Rae. I always feel underinsuranced when these threads pop up. But overall, I'm still good with the amount of life insurance we have. $65K pays off the house and the vacation land. We've got no other outstanding bills.
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lynnerself
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Post by lynnerself on Jan 30, 2014 11:34:29 GMT -5
You need to look at what you want the money to do. Do you want your house paid off? Do you want the surviving partner to be able to stop working or cut back on hours? Are you only looking to replace the lost income, more than that, pay for college?
These things help decide how much you need. Not just the 8-10x income.
We had about 5 x our income. We knew we could make enough adjustments if something happened that it would be enough.
The other thing we did is get more than one policy with different terms. You might need 1 million now to raise your kids and pay for college. But you wouldn't need that much in 15 or 20 years.
We figured as we aged and our assets grew we would need less insurance.
So we had policies that expired at 15, 20 and 25 years.
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HoneyBBQ
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Post by HoneyBBQ on Jan 30, 2014 11:46:52 GMT -5
You need to look at what you want the money to do. Do you want your house paid off? Do you want the surviving partner to be able to stop working or cut back on hours? Are you only looking to replace the lost income, more than that, pay for college? These things help decide how much you need. Not just the 8-10x income. Agree with this post - for me, my rationale was - I want the house paid off and my DD's college paid + the amounts to DH's other children in the will. For us this was around 1MM. And for simplicity's sake, I just matched that for insurance for me which was much cheaper. Things change a lot from conventional wisdom if both people work and bring home around 50% each. I/We don't need anywhere near 8-10X the income.
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Deleted
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Post by Deleted on Jan 30, 2014 12:00:43 GMT -5
We don't have life insurance. I think about it everytime a thread comes up, if that is worth anything.
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Peace77
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Post by Peace77 on Jan 30, 2014 12:01:26 GMT -5
Do they still sell the "couple's" insurance? I know that wasn't the name, but you could get a single $1,000,000 policy on both of you. If either of you died, the insurance paid off. The other person, though, was no longer insured. It was much cheaper than two separate policies and might meet your needs . . . if it is still around. That's a good question and does sound easier. That sounds like a bad idea. By the time the first person dies, the 2nd person may have health conditions or illness that makes getting insurance impossible, It's best for each person to have renewable level term insurance.
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Regis
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Post by Regis on Jan 30, 2014 12:18:25 GMT -5
I have a spreadsheet that has tracked both income and expenses yearly as well as accumulated wealth for the past several. I use it to project out the same in the future (taking into account inflation, kids moving out on their own, no mortgage payment, etc.). I then adjust the spreadsheet to project what would happen if one of us died. I do this for both DW and myself. When this is done, I'm in the negative numbers for accumulated wealth when the survivor is 100 (which is how long I assume I'll live). I then add a lump sum amount to the current year until the accumulated wealth at 100 is greater than 0. That's the amount of insurance needed to survive to 100.
For information, the amount of insurance we need is about 7x income for both DW and myself.
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Post by Deleted on Jan 30, 2014 14:04:02 GMT -5
I've always had very good coverage through my employer (around 5X salary) so haven't bought it on my own although I realize there are risks to that since you can develop problems that make life insurance very expensive and then lose your job. At this point, I'm almost 61 and DH is 75 and there's enough in the investments that neither of us needs life insurance proceeds if the other predeceases us. I am, however, planning to talk to DS about this. His wife is expecting a baby and planning to quit work and be a SAHM. He's said he'd get insurance and he's pretty responsible when it comes to taking care of DDIL, but I want to make sure she's protected.
The "couples" policy is called Joint coverage. Still a very popular product.
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quince
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Post by quince on Jan 30, 2014 14:20:53 GMT -5
We have nothing on me- my husband does not rely on my income, and would be able to cover the things I do out of his surplus without drowning. He elected not to have me insured, and since he's the one who would be dealing with it if I died, he gets what he wants.
We have $500K on my husband- I DO rely on his income. $500K would be enough to let me SAH where we live now for the next 12 years if I wanted to(I wouldn't, of course- too risky.). SS benefits for the kid would be gravy. After we move, it would be enough to cover the difference between what I could earn and what we would need to make things comfortable. The insurance is only for 10 years, I think (Maybe 5?) so it's $200/year. I expect our savings to be sufficient that income replacement not be a problem at the end of the term of the life insurance.
He owns the policy- I'm the beneficiary.
We do need to make arrangements for what happens if we both bite it.
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Post by Deleted on Jan 30, 2014 15:16:57 GMT -5
That's a good question and does sound easier. That sounds like a bad idea. By the time the first person dies, the 2nd person may have health conditions or illness that makes getting insurance impossible, It's best for each person to have renewable level term insurance. I think the idea is that you are insuring the surviving parent's ability to take care of the family, not provide a windfall of any sort. Would the surviving parent also need $1,000,000 worth of additional insurance to protect the family in addition to the first $1,000,000? Maybe. I'd be more worried that I was separately insurable if we got a divorce. I'm not saying it is the best method of insurance, but it is apparently still an option. I always thought its value is that it didn't just insure the higher wage earner. The higher wage earner might be stunned at how much it takes to replace the services of a stay-at-home-spouse, for example, when there are children involved.
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Post by Deleted on Jan 30, 2014 15:22:37 GMT -5
I've always had very good coverage through my employer (around 5X salary) so haven't bought it on my own although I realize there are risks to that since you can develop problems that make life insurance very expensive and then lose your job. At this point, I'm almost 61 and DH is 75 and there's enough in the investments that neither of us needs life insurance proceeds if the other predeceases us. I am, however, planning to talk to DS about this. His wife is expecting a baby and planning to quit work and be a SAHM. He's said he'd get insurance and he's pretty responsible when it comes to taking care of DDIL, but I want to make sure she's protected. The "couples" policy is called Joint coverage. Still a very popular product. Yeah, work life insurance always worried me. You could be diagnosed with something like cancer or have a heart attack and end up quitting for health reasons and then be sitting there terminally ill with no life insurance and no way of ever getting it. Plus, our rates reset every year with the annual enrollment, so if you move up an age bracket you pay more. With a private term policy your rates are locked.
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cronewitch
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Post by cronewitch on Jan 30, 2014 15:53:55 GMT -5
I think too much isn't a huge problem but even a small amount would help. The child who loses a working parent get SS survivors so need a little less on the worker. Lower paid people need less because they have smaller bills. Renters need less because they can downsize. Attractive people need less because they can remarry. A small amount like 100K will help pay the rent or daycare until you get a new lifestyle. A few million would be a great windfall but enough to pay off the mortgage and pay for college without a SAHP having to take a job is about right.
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Post by Deleted on Jan 30, 2014 16:36:29 GMT -5
I've never looked at prices but there's decreasing term insurance available for mortgages. As the principal is paid off, less coverage is needed so the amount (and presumably the premium) decreases. Typically you get lots of offers for this after buying a house since the marketers of the porduct check the public records for recent transactions.
DS' babysitter and her husband took it out years ago. They passed whatever underwriting criteria the company had but 6 months later he was disgnosed with inoperable brain cancer and died only a couple of months after that. The insurance was a huge blessing at a tough time; she probably wouldn't have been able to stay in the house without it.
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phil5185
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Post by phil5185 on Jan 30, 2014 17:02:51 GMT -5
These plans are typically expensive (compared to just buying more life insurance), that's why they are pushed. But in general it is better for the surviving family to avoid big changes to the budget - ie, continue paying on the existing mortgage, avoid prepaying.
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Formerly SK
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Post by Formerly SK on Jan 30, 2014 17:21:23 GMT -5
We don't have life insurance. I think about it everytime a thread comes up, if that is worth anything. We have insurance but no will...and no decent guardian to take our kids. It honestly freaks me out when I think of who would take our kids.
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Post by Deleted on Jan 30, 2014 17:31:28 GMT -5
These plans are typically expensive (compared to just buying more life insurance), that's why they are pushed. But in general it is better for the surviving family to avoid big changes to the budget - ie, continue paying on the existing mortgage, avoid prepaying. Yes, I agree. I remember that buying a term policy for the life of your mortgage was pretty much the same price, but the payout never decreased. Of course, this was back when we were in our twenties, very insurable, and the mortgage was $37,000. That's 1974 to the rest of you.
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raeoflyte
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Post by raeoflyte on Jan 30, 2014 17:36:21 GMT -5
We don't have life insurance. I think about it everytime a thread comes up, if that is worth anything. We have insurance but no will...and no decent guardian to take our kids. It honestly freaks me out when I think of who would take our kids. This is us too. Sent from my ADR6410LVW using proboards
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kittensaver
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Post by kittensaver on Jan 30, 2014 17:50:57 GMT -5
The children we raised are now out of the house, so this may not help you but - -
We each have individual whole life policies. They have been in place for 25+ years. We got them early in our marriage because we knew they would only get more expensive as we got older (if indeed we could even get them AT ALL after age 50 or so). No, Phil, and all the investors out there, we did NOT get them as an investment instrument - we got them because they are permanent coverage (as opposed to term life). If knock-on-wood we don't need them (Please God), of course there will be enough money at some point in our old age to stop paying the premiums and keep the policy in force. And our heirs/beneficiaries get some $$ from us.
We each took out policies that are roughly the size of our mortgage. Our reasoning for this was that should one of us die early (before retirement), the other would have enough $$ to pay off the mortgage and have a permanent roof over our heads in a situation of reduced income. If I lost my husband now or any time before retirement, I would hang onto the house (because it is my home and I really feel comfortable in it). He has said he would probably sell and move - clearly his choice, but I at least want him to have options.
We did not go after huge policies ($1mil+) because we both work and both make decent incomes. If one of us dies early, the other will not be unemployed and potentially destitute (and in need of another permanent income source). We are debt free except for the mortgage, so our policies only needed to cover that contingency.
This line of reasoning may not work for everyone, but it works for us.
ETA: the policies are NOT tied to our mortgage payment; they are individual plans that will pay out in cash to the beneficiary. It was just our thinking that it should cover our largest expense - the mortgage - should one of us die early. Clearly either one of us could use the $$ for any reason we wanted.
Mine is $150 per month; his is $185.
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